Reported with an amendment, committed to the Committee of
the Whole House on the State of the Union, and ordered to be
printed

Strike out all after the enacting clause and insert
the part printed in italic

For text of introduced bill, see copy of bill as
introduced on September 27, 2007

A BILL

To amend the Internet Tax Freedom Act to
extend the moratorium on certain taxes relating to the Internet and to
electronic commerce.

1.

Short title

This Act may be cited as the
Internet Tax Freedom Act Amendments
Act of 2007.

2.

Moratorium

The Internet Tax Freedom Act (47 U.S.C. 151
note) is amended—

(1)

in section 1101(a) by striking
2007 and inserting 2011, and

(2)

in section 1104(a)(2)(A) by striking
2007 and inserting 2011.

3.

Grandfathering of States
that tax internet access

Section 1104 of the Internet Tax Freedom Act
(47 U.S.C. 151 note) is amended by adding at the end the following:

(c)

Application of
definition

(1)

In
general

Effective as of November 1, 2003—

(A)

for purposes of
subsection (a), the term Internet access shall have the meaning
given such term by section 1104(5) of this Act, as enacted on October 21, 1998;
and

(B)

for purposes of subsection (b), the term
Internet access shall have the meaning given such term by
section 1104(5) of this Act as enacted on October 21, 1998, and amended by
section 2(c) of the Internet Tax Nondiscrimination Act (Public Law
108–435).

(2)

Exceptions

Paragraph
(1) shall not apply until November 1, 2007, to a tax on Internet access that
is—

(A)

generally imposed and actually enforced on
telecommunications service purchased, used, or sold by a provider of Internet
access, but only if the appropriate administrative agency of a State or
political subdivision thereof issued a public ruling prior to July 1, 2007,
that applied such tax to such service in a manner that is inconsistent with
paragraph (1); or

(B)

the subject of litigation
instituted in a judicial court of competent jurisdiction prior to July 1, 2007,
in which a State or political subdivision is seeking to enforce, in a manner
that is inconsistent with paragraph (1), such tax on telecommunications service
purchased, used, or sold by a provider of Internet access.

(3)

No
inference

No inference of
legislative construction shall be drawn from this subsection or the amendments
to section 1105(5) made by the Internet Tax
Freedom Act Amendments Act of 2007 for any period prior to
November 1, 2007, with respect to any tax subject to the exceptions described
in subparagraphs (A) and (B) of paragraph
(2).

means a service that
enables users to connect to the Internet to access content, information, or
other services offered over the Internet;

(B)

includes the purchase,
use or sale of telecommunications by a provider of a service described in
subparagraph (A) to the extent such telecommunications are purchased, used or
sold—

(i)

to provide such service;
or

(ii)

to otherwise enable
users to access content, information or other services offered over the
Internet;

(C)

includes services that
are incidental to the provision of the service described in subparagraph (A)
when furnished to users as part of such service, such as a home page,
electronic mail and instant messaging (including voice- and video-capable
electronic mail and instant messaging), video clips, and personal electronic
storage capacity; and

(D)

does not include voice,
audio or video programming, or other products and services (except services
described in subparagraph (A), (B), or (C)) that utilize Internet protocol or
any successor protocol and for which there is a charge, regardless of whether
such charge is separately stated or aggregated with the charge for services
described in subparagraph (A), (B), or
(C).

,

(3)

by amending paragraph (9)
to read as follows:

(9)

Telecommunications

The term telecommunications
means telecommunications as such term is defined in section
3(43) of the Communications Act of 1934 (47 U.S.C. 153(43)) and
telecommunications service as such term is defined in section
3(46) of such Act (47 U.S.C. 153(46)), and includes communications services (as
defined in section 4251 of the Internal Revenue Code of 1986 (26 U.S.C.
4251)).

,
and

(4)

in paragraph (10) by
adding at the end the following:

(C)

Specific
exception

(i)

Specified
taxes

Effective November 1, 2007, the term tax on Internet
access also does not include a State tax expressly levied on commercial
activity, modified gross receipts, taxable margin, or gross income of the
business, by a State law specifically using one of the foregoing terms,
that—

(I)

was enacted after June
20, 2005, and before November 1, 2007 (or, in the case of a State business and
occupation tax, was enacted after January 1, 1932, and before January 1,
1936);

(II)

replaced, in whole or in
part, a modified value-added tax or a tax levied upon or measured by net
income, capital stock, or net worth (or, is a State business and occupation tax
that was enacted after January 1, 1932 and before January 1, 1936);

(III)

is imposed on a broad
range of business activity; and

(IV)

is not discriminatory in
its application to providers of communication services, Internet access, or
telecommunications.

(ii)

Modifications

Nothing
in this subparagraph shall be construed as a limitation on a State’s ability to
make modifications to a tax covered by clause (i) of this subparagraph after
November 1, 2007, as long as the modifications do not substantially narrow the
range of business activities on which the tax is imposed or otherwise
disqualify the tax under clause (i).

(iii)

No
inference

No inference of legislative construction shall be drawn
from this subparagraph regarding the application of subparagraph (A) or (B) to
any tax described in clause (i) for periods prior to November 1,
2007.

This Act, and the
amendments made by this Act, shall take effect on November 1, 2007, and shall
apply with respect to taxes in effect as of such date or thereafter enacted,
except as provided in section 1104 of the Internet Tax Freedom Act (47 U.S.C.
151 note).

October 12, 2007

Reported with an amendment, committed to the Committee of
the Whole House on the State of the Union, and ordered to be
printed